My personal blog about international trade, public policy & politics, pop culture, and stuff that probably interests only me

Thursday, February 25, 2010

The Awful (and Utterly Predictable) Results of an Exports-only Approach to Selling Trade

A recurring theme of this blog is my repeatedattempts to convince free traders (all five who read this blog) that the current mainstream approach to selling free trade is a dead loser, despite the overwhelming economic support for the good guys' side of the debate. This approach - championed by Republican and Democrat administrations alike - is one that focuses almost entirely on expanding US exports, while completely ignoring the proven benefits of imports and foreign investment for US businesses and consumers. And it is manifest in America's insistence on "reciprocal" trade negotiations with other countries - a decades-old system in which the United States only agrees to open its markets if our trading partners open theirs too. Of course, this outdated system (and the United States' blind commitment to it) reinforces the idea that exports are good, and imports are the bad things that we must reluctantly accept in order to gain new export markets.

The reality, of course, is that both exports AND imports are good, and there are mountains of empirical and anecdotal evidence supporting this central truth - especially in this modern era of global supply chains and multinational investment. But when our leaders' attempts to sell trade focus only on exports, and when "reciprocity" becomes the central tenet of national trade policy, the obvious, yet completely wrong, implication is that the trade balance (exports minus imports) is a "scorecard," and that a trade deficit (more imports than exports) means that we are "losing" at trade. And, sadly, this false implication is readily manipulated by protectionists seeking to restrict global trade (and, by extension, individuals' right to voluntarily engage in, and benefit from, it).

This overly long introduction leads us to the dreadful CNN piece below, which first aired this morning. The segment - part of CNN's "broken government" series - highlights the critical and fundamental flaws with the conventional attempts to sell trade by focusing on exports and ignoring import benefits.

There is so much wrong with this piece that it's difficult to find where to begin, and I probably could write a novel critiquing it (pathetic, I know). But for now, I'm just going to focus on the "assumptive close" that provides the basis for the entire CNN piece: the trade deficit is an awful thing, so what can government do to stop it? As I've discussed repeatedly, this "fact" is patently false, but the folks in the piece who are supposedly there to "defend" free trade - USTR Ron Kirk and a Maryland small businessman - speak only of boosting exports and never of imports' value to the US economy. As such, they utterly fail to refute host Carol Costello's incorrect introductory assumptions about the US trade deficit. Instead, their "solution" to the trade deficit "problem" is just more exports. This, of course, will lead most viewers to simply conclude that as long as we have a trade deficit, US trade policy and free trade more generally are bad for the United States. And since that deficit isn't going anywhere anytime soon, public support for free trade (and politicians' willingness to resist protectionist lobbying) will never improve - especially when the "bad guys" are out there preying on the trade deficit and misleading the public about its allegedly deleterious effects.

But don't just take my word for it. Here's part of an email that I received today from the anti-trade group Public Citizen's Global Trade Watch, one that's just chock-full of protectionist myths (internal links are mine and will debunk each myth highlighted):

The USTR website lists official sources and then only the Chamber as authorities for trade data - no universities, no unions -- just the country's main corporate lobby!

And the Chamber's website is just wrong. It covers only the impact of exports on jobs. Totally missing from the Chamber's site is any mention of the harmful effects of the massive trade deficit that has accrued since its beloved NAFTA, WTO and similar trade deals went into effect. (That would be a trade deficit going from $25 billion in 1993 to $263 billion in 2009 with NAFTA countries alone).

Now, I've gone over all of the myths that GTW is pushing here (and the links will do it again), so there's no need to re-cover that ground here. Instead, I just ask one simple question that I think proves my point: how can a free trade policy that focuses only on exports ever refute such deficit-driven myths and recapture American support for trade?

The quick answer: it can't. And until US trade policy and free traders' arguments change, GTW will keep lying, CNN will keep getting away with lazy, wrongheaded "journalism" like the segment above, and the American public will keep worrying about free trade.